Mo. R. Gov. Bar Jud. 4-1.15
Records may be maintained by electronic, photographic, or other media provided that they otherwise comply with Rules 4-1.145 to 4-1.155 and that printed copies can be produced. These records shall be readily accessible to the lawyer.
Upon dissolution of a law firm or of any legal professional corporation, the partners shall make reasonable arrangements for the maintenance of client trust account records. Upon the sale of a law practice, the seller shall make reasonable arrangements for the maintenance of records.
Complete records shall include at a minimum:
Mo. R. Gov. Bar Jud. 4-1.15
OVERDRAFT REPORTING
Advisory Committee Regulation
(a) The advisory committee shall only approve a financial institution that files with the adversary committee an agreement in a form provided by the advisory committee.
(b) The financial institution shall agree:
(1) To report to the chief disciplinary counsel whenever any properly payable instrument or other debit is presented against a lawyer's client trust account containing insufficient funds, irrespective of whether or not the instrument or debit is honored;
(2) To cooperate with the chief disciplinary counsel's investigation related to a report;
(3) To maintain a copy of all records related to a report for a period of five years. Any such agreement shall apply to all branches of the financial institution and shall not be cancelled except upon 30 days notice in writing to the advisory committee. If a financial institution or branch changes ownership, the new owner must seek approval from the advisory committee or provide notice of cancellation within 30 days, unless the new owner is a financial institution that is already approved;
(4) To make all reports within five days after the financial institution knows of the overdraft, in the following format:
(A) In the case of a dishonored instrument or debit, the report shall be identical to the overdraft notice customarily forwarded to the depositor, and shall include a copy of any dishonored instrument, if such a copy is normally provided to depositors;
(B) In case of instruments or debits that are presented against insufficient funds but which instruments are honored, the report shall identify the financial institution, the lawyer or law firm, the account number, the date of presentation for payment and the date paid, as well as the amount of overdraft created thereby.
(c) The advisory committee shall annually publish a list of approved financial institutions, shall update the list seasonably, and shall provide a copy of the updated list to any Missouri lawyer upon written request. The advisory committee shall promptly publish notification of revocation of the approval of a financial institution and shall promptly notify the foundation.
(d) The report of an overdraft to the chief disciplinary counsel does not automatically result in disciplinary action. The lawyer shall be given an opportunity to explain the report, including providing evidence that the report resulted from an error by the financial institution.
(e) Nothing herein shall preclude a financial institution from charging a particular lawyer or law firm for the reasonable cost of producing the reports and records required by this rule. No charges or fees related to an overdraft shall be removed from funds to be remitted to the foundation.
(f) Approval of a financial institution shall be revoked and the financial institution removed from the list of approved financial institutions if it is found to have engaged in a pattern of neglect or to have acted in bad faith in noncompliance with its obligations under the written agreement.
(1) The chief disciplinary counsel shall communicate any decision to seek revocation of approval to the financial institution in writing by certified mail at the address given on the agreement. The revocation notice shall state the specific reasons for which revocation is sought and advise of any right to reconsideration. The financial institution shall have 15 days from the date of the receipt of the written notice to file a written request with the chief disciplinary counsel seeking reconsideration of the chief disciplinary counsel's decision. Failure of the financial institution to timely seek reconsideration, in writing, after receipt of notification is acceptance of revocation.
(2) If, after reconsideration, the chief disciplinary counsel notifies the financial institution of the intent to seek revocation, the financial institution shall accept or reject the revocation, in writing, within 15 days of receipt of the notice. Failure of the financial institution to timely reject revocation, in writing, is acceptance of revocation. If revocation is rejected, the chief disciplinary counsel shall prepare an information. The procedures shall be the same as those set forth in Rule 5 for a disciplinary hearing on a lawyer. The approved status of the financial institution shall continue until such time as this process is final.
(3) Once revocation of the approval of the financial institution is final, the institution shall not thereafter be approved as a depository for attorney trust accounts until such time as the financial institution petitions the advisory committee for new approval, including in the petition a plan for curing any deficiencies that resulted in the prior revocation and for periodically reporting compliance with the plan in the future.
(g) Within 15 days of the date revocation becomes effective or of notification that the financial institution is canceling the agreement, a financial institution shall give written notification of the revocation action to all holders of lawyer trust accounts on deposit with the financial institution, and file a report with the chief disciplinary counsel of such notification contacts within 30 days.
(h) Any lawyer or law firm receiving notification from a financial institution that the institution's approval as a trust account depository has been revoked or that the financial institution is canceling its agreement shall remove all trust accounts from the financial institution within 30 days of receipt of such notice or by such later date as is required for the payment of all outstanding items payable from the trust account, and shall send written notice of compliance to the chief disciplinary counsel, including the name and address of the new trust account depository institution.
COMMENT
[1] A lawyer should hold property of others with the care required of a professional fiduciary. Securities should be kept in a safe deposit box, except when some other form of safekeeping is warranted by special circumstances. All property that is the property of clients or third persons, including prospective clients, must be kept separate from the lawyer's business and personal property and, if monies, in one or more trust accounts. Separate trust accounts may be warranted when administering estate monies or acting in similar fiduciary capacities. A lawyer should maintain on a current basis books and records in accordance with generally accepted accounting practice and comply with any recordkeeping rules established by law or court order.
[2] Rules 4-1.15(a)(3) to (7) enumerate minimal accounting controls for client trust accounts. It also enunciates the requirement that only a lawyer admitted to the practice of law in the jurisdiction or a person who is under the direct supervision of the lawyer shall be the authorized signatory or authorize electronic transfers from a client trust account. While it is permissible to grant limited nonlawyer access to a client trust account, such access should be limited and closely monitored by the lawyer. The lawyer has a non-delegable duty to protect and preserve the funds in a client trust account and can be disciplined for failure to supervise subordinates who misappropriate client funds. See Rules 4-5.1 and 4-5.3.
[3] Authorized electronic transfers shall be limited to:
(1) money required for payment to a client or third person on behalf of a client;
(2) expenses properly incurred on behalf of a client, such as filing fees or payment to third persons for services rendered in connection with the representation; or
(3) money transferred to the lawyer for fees that are earned in connection with the representation and are not in dispute; or
(4) money transferred from one client trust account to another client trust account.
[4] The requirements in Rule 4-1.15(a)(4) that receipts shall be deposited intact mean that a lawyer cannot deposit one check or negotiable instrument into two or more accounts at the same time, a practice commonly known as a split deposit.
[5] Rule 4-1.15(a)(6) establishes that a lawyer must wait a reasonable period of time for deposited funds to be collected by the financial institution in which the trust account is located before disbursing funds on that deposit. This is often referred to as the deposit being "good funds." It is not sufficient to wait only until the deposit is "cleared" or "available" according to financial institution records. In either of those situations, the transaction may be reversed by the financial institution if a problem arises. The amount of time that is reasonable to wait may vary from one financial institution to another, depending on the financial institution's processing method. Waiting 10 days after the date the bank records the deposit is presumed to be a reasonable period, unless a lawyer has actual notice of a reason to wait longer on a specific deposit. A shorter period may be reasonable, in some circumstances. A lawyer must also delay disbursement and take extra measures to ensure collection before disbursement if the lawyer is aware of information that causes doubt about the collection or collectability of the deposit.
[6] While normally it is impermissible to commingle the lawyer's own funds with client funds, Rule 4-1.15(b) provides that it is permissible when necessary to pay financial institution service charges on that account. Accurate records must be kept regarding which part of the funds are the lawyer's.
Except as provided in 4-1.15(b), funds belonging to the lawyer must be disbursed to the lawyer reasonably promptly after the fee is earned or the expense paid and the client: has been billed, has had an opportunity to dispute the disbursement, or otherwise has agreed to the disbursement. Disbursement within a period of one month shall be presumed to be reasonably promptly. A longer period may be considered reasonably prompt, in some circumstances.
[7] Lawyers often receive funds from which the lawyer's fee will be paid. The lawyer is not required to remit to the client funds that the lawyer reasonably believes represent fees owed. However, a lawyer may not hold funds to coerce a client into accepting the lawyer's contention. The disputed portion of the funds must be kept in a trust account, and the lawyer should suggest means for prompt resolution of the dispute, such as arbitration. The undisputed portion of the funds shall be promptly distributed.
[8] Rule 4-1.15(e) also recognizes that third parties may have lawful claims against specific funds or other property in a lawyer's custody, such as a client's creditor who has a lien on funds recovered in a personal injury action. A lawyer may have a duty under applicable law to protect such third-party claims against wrongful interference by the client. In such cases, when the third-party claim is not frivolous under applicable law, the lawyer must refuse to surrender the property to the client until the claims are resolved. A lawyer should not unilaterally assume to arbitrate a dispute between the client and the third party, but, when thee are substantial grounds for dispute as to the person entitled to the funds, the lawyer may file an action to have a court resolve the dispute.
[9] The obligations of a lawyer under Rules 4-1.145 to 4-1.155 are independent of those arising from activity other than rendering legal services. For example, a lawyer who serves only as an escrow agent is governed by the applicable law relating to fiduciaries even though the lawyer does not render legal services in the transaction and is not governed by these Rules 4-1.145 to 4-1.155.
[10] A lawyers' fund for client protection provides a means through the collective efforts of the bar to reimburse persons who have lost money or property as a result of dishonest conduct of a lawyer. Where such a fund has been established, a lawyer must participate where it is mandatory, and, even when it is voluntary, the lawyer should participate.
[11] The basic financial records that a lawyer must maintain with regard to all trust accounts of a law firm include the standard books of account and the supporting records that are necessary to safeguard and account for the receipt and disbursement of client or third person funds.
[12] Regardless of the arrangements the partners or shareholders make among themselves for maintenance of the client trust records, each partner maybe held responsible for ensuring the availability of these records.
[13] Alternative media for the maintenance of client trust account records may be used if printed copies of necessary reports can be produced. If trust records are computerized, a system of regular and frequent (preferably daily) back-up procedures is essential. If a lawyer uses third-party electronic or internet based file storage, the lawyer must make reasonable efforts to ensure that the company has in place, or will establish reasonable procedures, to protect the confidentiality of client information. See ABA Formal Ethics Opinion 398 (1995). Required records shall be readily accessible and shall be readily available to be produced upon request by the client or third person who has an interest as provided in Rule 4-1.15 or by the official request of a disciplinary authority, including but not limited to, a demand under Rule 4-8.1 or a subpoena duces tecum. Personally identifying information in records produced upon request by the client or third person or by disciplinary authority may be the appropriate subject of a protective order.
[14] Rule 5.26 provides for the appointment of a trustee to handle the storage or disposition of a lawyer's client trust account records in the event that the lawyer is suspended, disbarred, disappears, or dies.
[15] The physical or electronic equivalents of all checkbook registers, financial institution statements, records of deposit, pre-numbered canceled checks, and substitute checks must be maintained for a period of five years after termination of each legal engagement or representation. The "Check Clearing for the 21st Century Act" or "Check 21 Act", codified at 12 U.S.C. §§ 5001 et. seq., recognizes "substitute checks" as the legal equivalent of an original check. A "substitute check" is defined at 12 U.S.C. § 5002(16) as "paper reproduction of the original check that contains an image of the front and back of the original check; bears a magnetic ink character recognition ("MICR") line containing all the information appearing on the MICR line of the original check; conforms with generally applicable industry standards for substitute checks; and is suitable for automated processing in the same manner as the original check. "Banks," as defined in 12 U.S.C. § 5002(2), are not required to return to customers the original canceled checks. Most banks now provide electronic images of checks to customers who have access to their accounts on internet-based websites. It is the lawyer's responsibility to download electronic images. Electronic images shall be maintained for the requisite number of years and shall be readily available for printing upon request or shall be printed and maintained for the requisite number of years.
[16] The ACH (Automated Clearing House) Network is an electronic funds transfer or payment system that primarily provides for the inter-bank clearing of electronic payments between originating and receiving participating financial institutions. ACH transactions are payment instructions to either debit or credit a deposit account. ACH payments are used in a variety of payment environments including bill payments, business-to-business payments, and government payments (e.g., tax refunds.) In addition to the primary use of ACH transactions, retailers and third parties use the ACH system for other types of transactions, including electronic check conversion (ECC). ECC is the process of transmitting MICR information from the bottom of a check, converting check payments to ACH transactions depending upon the authorization given by the account holder at the point-of-purchase. In this type of transaction, the lawyer should be careful to comply with the requirements to maintain documentation of the transaction.
[17] There are five types of check conversions where a lawyer should be particularly careful to maintain good documentation. First, in a "point-of-purchase conversion," a paper check is converted into a debit at the point of purchase and the paper check is returned to the issuer. Second, in a "back-office conversion," a paper check is presented at the point of purchase and is later converted into a debit and the paper check is destroyed. Third, in an "account-receivable conversion," a paper check is converted into a debit and the paper check is destroyed. Fourth, in a "telephone-initiated debit" or "check-by-phone" conversion, bank account information is provided via the telephone and the information is converted to a debit. Fifth, in a "web-initiated debit," an electronic payment is initiated through a secure web environment. The need for complete documentation applies to each of the type of electronic funds transfers described. All electronic funds transfers shall be recorded and a lawyer should not re-use a check number that has been used previously in an electronic transfer transaction.
[18] The potential of these records to serve as safeguards is realized only if reconciliations are regularly performed. Reconciliation each time a statement is generated by the financial institution will enable the easiest identification of an error (whether by the lawyer or the financial institution).
[19] In some situations, documentation in addition to that specified in this Rule 4-1.15 is necessary for a complete understanding of a trust account transaction. The type of document that a lawyer must retain because it is "reasonably related" to a client trust account transaction will vary depending on the nature of the transaction and the significance of the document in shedding light on the transaction. Examples of documents that typically must be retained under this Comment [19] include correspondence between the client and lawyer relating to a disagreement over fees or costs or the distribution of proceeds, settlement agreements contemplating payment of funds, settlement statements issued to the client, documentation relating to sharing litigation costs and attorney fees for subrogated claims, agreements for division of fees between lawyers, guarantees of payment to third parties out of proceeds recovered on behalf of a client, and copies of bills, receipts or correspondence related to any payments to third parties on behalf of a client (whether made from the client's funds or from the lawyer's funds advanced for the benefit of the client).
[20] Even though an advanced flat fee that will be promptly paid and which does not exceed $2,000 may be placed directly into the office operating account, if the attorney-client relationship is terminated prior to the advanced flat fee being earned then any unearned portion of the advanced fee shall be refunded.
Rule 4-1.15(h) requires that lawyers certify the existence of one or more IOLTA, non-IOLTA, or exempt trust accounts in an eligible and approved financial institution or certify the circumstances under which they are not required to maintain such an account. See Rule 4-1.145 (defining IOLTA, non-IOLTA, and exempt trust accounts and eligible and approved financial institutions). Circumstances requiring a trust account include, but are not limited to, a lawyer's or law firm's practice where the lawyer or law firm (a) receives or holds client funds, including fees paid in advance, except for advanced flat fees that do not exceed $2,000 that may be deposited into another account in accordance with Rule 4-1.15(c), (b) receives or holds third-party funds, (c) receives settlement funds or awards for the benefit of another, (d) receives real estate conveyance funds, or (e) receives funds to be used for court costs or client expenses. See Comment [20] (advanced flat fees).